Survivor Day Trading
By Ilan Levy-Mayer
I started as a commodity broker back in 1998, when com-
missions of $25 per round turn for the E-minis were consid-
ered a deep discount. I had the luxury of observing many
types of day traders and saw things from the sidelines that
most traders could not see during the heat of battle, one of
which is the importance of solid money management for the
long-term survival of day trade.
Day trading is by definition a trade that is initiated and
completed during the same trading day. In this wide category,
you will find many types of traders. On one end of the spec-
trum are scalpers, who go for one or two ticks of profit several
times a day in trades lasting just seconds. On the other side
are speculators who stay in a position from the start of the day
until the close. One of the main appeals of day trading for all
types is that the trader goes home flat without having to worry
about positions. When the market closes, the day is done.
Money management, as the name implies, is applying
prudent principles to help conserve your trade (risk) capital.
Without risk capital to trade, a speculator does not have a
chance to succeed.
Preserve Your Trading Capital
The liquidity and volume of markets including the E-mini
S&P 500, U.S. 30-year bonds and many others are attracting
increasing numbers of day traders. The speed of execution, the
growth in technology and a continued trend toward lower com-
missions provides an attractive environment for day trading.
Today, traders can take into account mixed markets that are
open nearly 24 hours a day and offer low day-trading margins.
It’s easy to understand the reason some futures markets are
now considered day-trading heavens for many who previously
traded stocks, foreign exchange and other instruments.
The result is consistent growth in popularity and trad-
ing volume over the past few years. On Feb. 27, the E-mini
S&P 500 traded 3,575,702 contracts! Yes, that is 3.575 mil-
lion. You, as an individual trader, may wonder how you can
participate and make it in the futures day-trading arena.
The answer is complex, and there are many paths to the
same destination, but in this article, I focus on the common
foundation: money management.
“Survive to trade another day” is a well-known saying in
our business. If you want to acquire the confidence and skills
of a successful day trader, you absolutely must preserve your
trading capital. Otherwise, you might end up with the educa-
tion and experience that you need only to have squandered
all your risk capital to acquire that education and experience! 
Preserving your trading capital is easy to understand but
difficult to do. You will need a tremendous amount of disci-
pline to apply good money management during live trading.
If you can implement some of the rules I outline below, you’ll
increase your chances of staying in the race long enough to
benefit from your own experience.
Many Try, Few Succeed 
In some ways, day trading can be a great job: no boss, poten-
tially large income, take a vacation whenever you wish—you
can even work in your pajamas if you want. However, no one
wants a job where he or she loses money going to work. Most
day traders do lose, but the high profit potential and flex-
ible lifestyle associated with day trading keeps many people
motivated to continue trying.
New traders as well as more experienced traders often won-
der and search for the perfect indicator, the “amazing method.”
Unfortunately, there are no perfect indicators or methods. But
there is a great deal of trial and error, evolving market condi-
tions and many obstacles against you. A successful path for
one trader may not be right for another, and different trad-
ers can have very different ways of implementing the same
strategy, with correspondingly varied results. Experience, risk
tolerance, the person’s schedule and financial situation, along
with other factors can greatly influence trading decisions.
Getting back to what I consider the first step in this long
journey: money management. It can and should be applied
in graduated steps: first to each trade you take, then to every
single trading day (as a day trader) and, finally, to your risk
capital in general and account as a whole.
One common, practical solution different traders can
implement when it comes to day trading is the principle:
Treat your daily profit/loss as you would treat an open trade.
As a broker, I sometimes see traders survive in this business,
make progress and even attain consistency finding their set
ups. Their main downfall is “one bad day” when they give up
recent gains, lose a large percentage of their accounts or even
lose their entire accounts in one session.
One way to eliminate those disastrous days and give you
a better chance for survival is simple. Use daily stop limits,
trailing stop losses and daily target profits on your trading
capital every single trading day.
Be Prepared to Lose
Let’s assume, for example, that trader A is day trading with
$10,000 of risk capital. Part of the preparation for trading
should involve understanding his trading style, knowing
how active a trader he is, and how much, on average, he is
willing to risk per trade. Defining these factors will help
calculate his daily loss limit, which is the backbone of money
management for day traders.
In my view, the daily loss limit should be as important in a
trader’s mind as the stop loss on an individual trade, if not more
so. If you are disciplined enough to set your own daily loss limit
and adhere to it carefully, you will give yourself better odds of
surviving in the day-trading arena and preventing catastrophic
days where you may lose a large portion or all of your account.
If you have been day trading more than a few weeks, I am
sure you have experienced that one, terrible day where you
look back and ask yourself, “Why didn’t I stop trading after I
was down X amount of dollars?” or “I cannot believe I made
$500 each day the last three days only to lose $2,500 today
because I could not walk away.”
From my experience, you will fare much better in the long
run by implementing a daily loss limit. The numbers just work
out that way. However, forcing yourself to adhere to your own
rules and actually walking away from trading once a daily
loss limit is reached is one of the most challenging steps a
trader can take. In my eyes, this ability separates traders from
gamblers. As a trader, you must accept risk, understand the
risk you have accepted and construct your own parameters of

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risk, knowing that one single trading day is just a small piece
of a much bigger puzzle. I have been assisting clients with day
trading online for nine years. I have never witnessed a situa-
tion where one single day “made a trader,” but I have witnessed
many single trading days that destroyed traders.
In the example, trader A, who started the day with $10,000,
should have a daily loss limit (depending on the level of
aggressiveness) somewhere between $700 to $1,000. (I will
provide a specific way to calculate your daily loss limit later.)
Take Your Profits
The next step, now that you have decided on what your daily
stop limit should be is to identify which level of profit will trigger
breakeven money management. By that, I refer to a level of daily
profit that triggers the thought: “I am up X amount today. If, for
whatever reason, the rest of my trading today does not go well
and my daily profit/loss is back to zero, I should call it a day.”
It is my opinion that once a trade reaches a critical level of
profit, it should not turn into a losing trade. Aside from the
financial implications, the psychological impact of watching
a nice profit turn into a loss can spell disaster, as it opens the
door to negative psychology that can spin out of control. The
same applies to your trading day as a whole. Knowing that
you have the mental toughness to walk away from trading if
a profitable day reaches the breakeven point will reward you
greatly the next trading session.
Going back to the example: Once trader A’s $10,000 starting
balance for the day generated a profit of $500, she should not
see her profit/loss for the day turn negative.
Moving on, you should also decide on a certain profit
target that is higher than your breakeven point. That level of
profit, when and if achieved during the day, should trigger
a corresponding trailing stop. Assume that trader A is now
up $1,000 during the trading day and after implementing the
new daily risk management strategy, has decided that if he
is ever up a $1,000 during the trading day, his trailing stop is
$500. That means trader A will continue to trade as long as he
does not give up more than $500 from the intraday high mark
of profits. If trader A continues to do well and is up $1,400
for the day, he should not finish the day with less than $900
in profits. If his profit/loss comes back down to $900, trader
A should flatten positions and call it a day. By implementing
this technique, he allows himself to continue trading as long
as he does not give up too much of the profit for that day.
Keep Greed in Check
Last but not least is the profit target. There are a few schools of
thought when it comes to daily profit targets. Some say that if a
trader is “hot,” he or she should continue trading to maximize
the potential for that day. I disagree. The hot trader brings us
back to the gambling rather than the trading mentality. In my
opinion, setting a daily profit target based on your account size
and other factors discussed previously serves you better in
the long run. If trader A decided that her daily profit target is
$2,000 and on any given day has reached that profit, trader A
should feel satisfied and successful. At that point, she would
close open positions, enjoy her good trading and call it a day.
I have seen too many instances of traders who are having
successful day-trading sessions let greed take over. Instead
of understanding the numbers and statistics, and saying
“Thank you! That was a great trading day” and leaving work
early, they continue to trade, accumulating additional trading
fees and giving up too much profit.
If you can train yourself to desire the daily target profit
that you set in advance, you help yourself create a positive
trading psychology, which is another big key to trading sur-
vival. Although I could expand more on this, it is a subject
for another article.
Only you know your financial condition, risk capital
and appetite for risk. Knowing these factors is imperative
before continuing.
Calculate a Daily Loss Limit
Now, to get back to a daily loss limit, here is one way to
calculate it:
1. How much risk capital can you start with? How much more
do you have available?
2. What is your risk tolerance? If you lose $1,000 in a day,
can you handle it emotionally and financially? Can you go
back and function as a parent, spouse or any of your other
important life roles for the rest of the day? What if you lose
$1,000 three days in a row, can you handle that?
3. Can your method of trading be quantified into an average
number of trades per day? If yes, how many? If not, find
the number by answering 1 and 2 above. Let’s say the aver-
age number of trades per day is four and the maximum
loss per trade is $100 per contract (two E-mini S& P 500
points). If there is no maximum loss per trade, you need to
start working on one!
4. Now we know that potentially you can lose $400 per contract
on average, per day. Based on the example of $10,000, I sug-
gest trading two contracts. You are exposed to an $800 loss
per day. That should determine your daily loss limit (which
will prevent those really bad days when mistakes multiply
and you can blow out a large portion of your account).
5. The amounts you should use for breakeven points, trail-
ing stops and daily target are functions of your daily loss

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limit. Calculate a common sense risk/reward—it may
have more to do with keeping a positive trading mentality
than pure mathematics.
Stay True to the Rules
I have seen the online futures trading industry grow signifi-
cantly and witnessed the evolution of the markets, technology
used for trading as well as many different types of traders. And
in 2005 I started to implement my ideas into trading systems.
During the past two years, I came to realize that I am person-
ally better off following a certain structure. As I gained more
experience in designing trading systems and backtesting data
over different periods and markets, I noticed that the princi-
ples mentioned above are almost always a must for a success-
ful trading system. I also noticed from working with different
clients, that if one has the discipline to apply and follow the
same rules to his or her day trading, the chances for success
increase as a trader eliminates the “sudden-death syndrome.”
It is my opinion that a trader will fare better in the long term
by initiating these concepts I borrowed from trading system
design. Getting to the point of working with these suggestions
requires one to analyze him- or herself as a trader, acquire
understanding of basic money management concepts and
develop the self discipline to execute his or her trading plan.
Just like in a marathon, mental toughness and clarity
separates the professionals from the amateurs. The same
applies to trading. Using the suggestions in this article can
help you remain mentally ready and positive while trading,
and to understand that although you are a day trader, your
progress and success are measured over time and not based
on any one single trading day. To give you a fair chance, be
ready for a marathon, not a sprint. Good trading!
Ilan Levy-Mayer is a senior broker and vice president of Cannon Trading
Co. Inc. (www.E-Futures.com) an online and full-service futures trading
brokerage firm located in Beverly Hills, Calif., since 1988. Levy-Mayer is
also the principal and trading strategist of LEVEX Capital Management Inc.
(www.levex.net), a commodity trading advisor, which started managing
client funds in April 2007.
Provided by permission of
SFO Magazine. Originally published September 2007.
© 2007 Wasendorf & Associates, Inc. • 3812 Cedar Heights Drive • Cedar Falls, IA 50613